XAU/USD bulls back in action as US Nonfarm Payrolls report looms

• Gold is back on the bid near $4,250 early Friday, following Thursday’s sharp pullback from seven-week highs.
• The US Dollar holds overnight rebound on doubts over US-Iran peace deal, ahead of US NFP.
• Gold’s daily technical setup suggests more upside in the near term.

Gold is finding fresh demand in Asia on Friday, pausing a sharp pullback from seven-week highs of $4,304 reached a day before. However, Gold bulls stay cautious ahead of the all-important US Nonfarm Payrolls (NFP) data release.

Risk sentiment remains tepid early Friday, as renewed tensions over the Strait of Hormuz passage raised doubts about a potential US-Iran peace deal.

Iran’s semi-official Fars news agency reported on Thursday, citing a lawmaker, that an Iranian parliamentary committee is reviewing a preliminary bill that would bar US, Israeli and other “hostile” vessels from transiting the Strait of Hormuz. The draft bill would impose fines of up to 20% of a ship’s cargo value for violations of the proposed restrictions.

Oil prices rebounded firmly on Iran headlines, re-igniting inflation worries and September Federal Reserve (Fed) interest rate hike bets.

These Middle East concerns revived the US Dollar’s (USD) appeal as a haven, allowing the buck to stage a comeback, while triggering a sharp pullback in Gold from multi-week highs.

As of Friday’s trading, so far, the Greenback is holding overnight gains, capping the latest uptick in Gold. However, Gold remains on track to book its best week since January.

Gold traders now eagerly await the monthly US labor market report, including the critical NFP reading, for fresh hints on the Fed’s outlook on rates, which will likely have a significant impact on the USD and US Treasury bond yields.

The headline NFP is expected to rise by 80,000 in July after a 57,000 increase in June. Meanwhile, the Unemployment Rate is set to remain at 4.2% in the same period.

According to TD Securities, July ADP employment data “surprised to the downside, moderating to 44k (TD: 50k, cons: 65k),” underscoring a softer tone after a robust start to the year. The bank stresses that it does “not put much weight on ADP when it comes to m/m moves in NFP,” but notes that “the trend in the data is in line with what we are expecting.” Both the monthly and weekly ADP series “have moderated this summer after a strong start to the year,” and TD Securities expects “a similar trend is likely to occur with NFP job gains,” reinforcing their view of gradually cooling labour market momentum.

If the NFP reading shows a bigger-than-expected print, it would be good news for the US economy. That could ramp up September Fed rate hike bets and render negative for non-yielding assets such as Gold.

Conversely, an NFP disappointment could propel Gold bulls toward fresh multi-week highs, reviving US labor market concerns and the USD downtrend.

Beyond US payrolls, markets will closely monitor the situation in the Middle East, with the US-Iran peace talks in focus alongside Oil prices.

In the daily chart, XAU/USD trades at $4,260.68. The pair holds above the 21-day simple moving average (SMA) at $4,083.25 and the 50-day SMA at $4,151.23, keeping the near-term bias bullish as price consolidates comfortably over these trend supports. The Relative Strength Index (14) at 61.00 shows firm positive momentum without yet entering overbought territory, which suggests scope for further gains while the metal remains supported by these underlying averages.

On the topside, initial resistance emerges at the 100-day SMA at $4,389.72, ahead of a more substantial barrier at the 200-day SMA around $4,494.54. On the downside, immediate support is seen at the 50-day SMA near $4,151.23, with the 21-day SMA at $4,083.25 acting as a deeper floor; a daily close below these levels would hint at a loss of bullish traction and a broader consolidation phase.